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2012

I interviewed Daniel Farias who discussed his views on the trend towards near shoring in Mexico.

 

 

State of global economy and impacts on near-shoring

 

NAFTA is a positive thing. Daniel doesn't believe Brazil will be the next major supplier to the US because while it is closer to the US compared with China, you are still dealing with ocean transportation, fluctuation of fuel costs, drayage etc. Mexico is closer to the US. It is easier to import from Mexico to the US. A major concern involving sourcing in Mexico or any South American country is that of quality. As long as you have a good company and partner in Mexico and you do your due diligence you should be able to source in Mexico without any major problems.

 

You can either view the glass as half empty or half full. Daniel likes to see things from the positive side. He believes the US had a bad habit of over extending through credit which resulted in extra funds. The idea of changing cars every few years or changing houses every few years doesn't help. Americans are starting to realize the nature of the market today. The issues in Greece, Spain and even Brazil (which has decreased their index several times this year and may not even get a 2.5% increase in their economy this year) is a major problem. However, it is a good sign for the US because if other economies are going on this path there is a possibility to get more jobs back to the US market and doing things in a different way.

 

You can bring more jobs closer to home. Some large corporations are looking at ways to bring jobs back to the US. They look at the cost of shipping and if the costs increase to a certain level it would make sense to bring more jobs closer to the US. Near-shoring in Mexico would bring more transportation and logistics jobs, as well as related industries.

 

Moving from China to Mexico

 

Daniel knows of a few companies who have tried to move from China to Mexico, due to the increase in shipping costs and the issue of lead time compared with Mexico. However, the US has invested so much in China that to go to another market and do the same thing will take a long time. While Mexico was a major player for the US economy 15-20 years ago, today the mentality of the workers in China is very different. The dynamic is very different. It will take some time and a change in mentality in Mexico and other countries in South America. This is a major disadvantage.

 

Proximity to the US is also an advantage of Mexico. With labor costs increasing in China a lot of companies are considering Mexico. Near-shoring in Mexico will present new options. The cost of shipping from Mexico to Milwaukee may cost $1200. However, ocean transportation from China to Milwaukee may be around $4500 not including fees and duties.

 

You can also find a lot of people who are able to speak English in Mexico. The cultural familiarity is also an advantage.

 

Finding the right talent in Mexico

 

Daniel believes that South American and Central American companies have a tendency to say they can do everything. The way the economies and bureaucracies work in those countries it is very hard to have one “go to guy”. You might have a handful of contacts who can help you on the ground. However, it is hard to have one person or solution for everything.

 

About Daniel Farias

 

daniel.jpgDaniel is originally from Brazil and started his career working for  AT&T in the supply chain function. He moved from Brazil to Italy to  work on a project where he revamped the supply chain and implemented  changes within 4 months. After this he moved to the US in 2003-2004. He  worked with EGL which today is called Ceva. His worked involved supply  chain management for a joint-venture with Cummins and several plants in  China, Japan, Turkey and the UK. In 2007 Daniel started as a sourcing  buyer and now is also a transportation buyer at Echo Engineering and  Production Supply. He also started his own consulting company called P3  Consulting & Sourcing Solutions, LLC where he helps companies to do  business in Brazil as well as other places around the world. He actually  works with companies in Indiana who are looking to buy and sell  products in Brazil.

 

Founder at P3 Consulting & Sourcing Solutions, LLC

Sourcing Buyer at Echo Engineering and Production Supply

LinkedIn Profile

Silvia Gomez is one of the founders of Greenoxx NGO which is dedicated mostly to developing forestry projects and projects for avoiding deforestation. The company is also involved in selling the carbon credits that are produced in order to help companies mitigate their carbon footprint. They are working intensely in the Peruvian Amazon and carbon credits are one of the tools they have today in order to mitigate the carbon footprints of companies. In order to reach carbon neutrality you have to 1. reduce emissions and 2. mitigate emissions which can't be reduced in the short term by the purchase of carbon credits.

 

In Uruguay they have started measuring the carbon footprints of meat but it is not something that is known among the general public. Silvia organized the first event on carbon neutrality in Uruguay.

 

 

Carbon Footprint and Global Supply Chains

 

In Europe it is quite advanced. There is a lot of experience, although it is not generally implemented. There are companies that have gone carbon neutral, others are calculating their carbon footprint but are not implementing any measures yet.

 

In the US there are also many examples. However, for most of the world not much has been applied yet. People are becoming conscious that it is something they should apply at some point and is something that is required by the buyers of their products but it is not something that is generally done.

 

Global Companies Need Awareness of their Global Footprints

 

Firstly, reducing carbon footprint will be a benefit to global companies. When you analyze the carbon footprint or emissions of a company you can identify many things that are done inefficiently. You learn where you can be more energy efficient in terms of transportation etc. which can reduce the company's costs.

 

In addition, it is something which contributes to the company's image. Consumers in many parts of the world are already asking about the carbon footprint of the products they are buying. This is something that will end being a global phenomenon among consumers. Silvia has seen examples in the wood industry where it has now become a requirement to have certification. This will happen in other industries around the world.

 

The objective of Green oxx is raise that awareness among corporations that carbon footprint is something they should take care of and that it will also end up being good business.

 

What Companies Should Do to Reduce Carbon Footprints

 

 

The first step is to take an inventory of your company's carbon footprint and identify where the biggest emissions are. The second step is to analyze every aspect such as logistics, use of energy, transportation, the products, suppliers, etc. If you are a company with many suppliers you can have a great impact by asking them to take care of their carbon footprints because every activity generates emissions. Even though we can be very efficient it is very difficult in some cases to be commercially viable. In such cases, companies can become carbon neutral by buying carbon credits from projects which are verified to be doing something for the environment.

 

About Silvia Gomez

 

silvia.jpg

 

Vice President and Founder

Greenoxx NGO

LinkedIn Profile

I interviewed Praveen Gupta who discussed his new book “The Innovation Solution, Making Innovation More Pervasive, Predictable and Profitable'. Praveen works at Accelper Consulting. Their goal is to help people learn more about innovation and help companies sustain profitable growth.

 

 

The book is designed for individuals to learn about innovation. There is a perception that innovation cannot be learned and that it is a gift we either have or don't have. Praveen wants to make innovation a science because this is the knowledge age. Considering that the product life cycles are shrinking we need to learn how to innovate faster.

 

It is not the issue of learning how to innovate but learning to innovate more efficiently, effectively and certainly more profitably.

 

How can 'The Innovation Solution' be applied to supply chains?

 

Supply chain involves people working in corporations as a continual chain. Suppliers and customers are organizations that can use innovation to understand:

 

  1. The customer's requirements and what would give them enjoyable experiences from their products and services.

  2. The customer's pains or opportunities for suppliers to offer new and innovative solutions.

 

As to suppliers they can expand their markets and create new products and services faster to broaden their customer base and also improve their profit margin. Innovative products executed well certainly provide much better profit margins than commodity products suppliers provide to their customers. We all can learn that innovation allows you to produce better products, newer products, more profitable products, but we must learn to make our innovations affordable and profitable.

 

This is why Praveen and his team have developed this curriculum to people to improve the performance of their new products.

 

How can companies deploy innovation?

 

People are concerned that they don't know how to deploy innovation and whether there will be a return on the money they invest. Praveen and his team recognize that it is the lack of understanding of the innovation process that prevents executives to commit the resources for innovative solutions and capabilities.

 

The first thing executives must do is commit to sustaining profitable growth. Profit requires excellence and execution and growth requires thinking and new products. Innovation will allow these companies to product new products and new solutions to grow their revenue. To do this they must create a portfolio of innovation and a portfolio of products and services, not only for today and tomorrow but also for the future. Innovation must become a perpetual process for an organization to sustain profitable growth.

 

Once the commitment is expressed, manifested and the portfolio of innovations of the products and services are created, then the education in innovation will allow them to execute the innovation process throughout.

 

Praveen has developed a road map called “Business Innovation Maturity Model' which has five stages: 1. Sporadic, 2. Idea Innovations, 3. Managed Innovations, 4. Nurtured Innovations and 5. Sustained Innovations. You go from pockets of innovation to engaging employees to perfecting your development process, creating a culture of innovation and managing it for making innovation more predictable, pervasive and profitable.

 

Can innovation be learned?

 

Any new field, science or discoveries in their early stages have always been a subjective body of knowledge. As it matures we learn more about it, make it more repeatable and routine and it becomes a science. Similarly, innovation has been in use for so long and everyone is innovative to some extent. It is an issue of how do we make innovation more profitable, routine, predictable and more manageable.

 

Everyone knows how to walk, but few of us jog and even fewer run and very few race. People who want to race go through training. Right now we have a global race for economic superiority. We must learn how to be playing a role in this race and planning to win the race.

 

How can small suppliers use innovation?

 

Small suppliers and large organizations all have customers. Customer demands are always changing. It doesn't matter what their size, whether retail business, dry cleaners to small manufacturing or service providers – we should always focus on what else we can do for our customers and to give them some enjoyable experiences. It could be a product or a service.

 

Once we have that kind of mindset that will lead us to develop new products, new capabilities and that will require us to learn how to develop those new products and services faster. New products and services do allow you to get better margins and make your customers loyal to you.

 

About Praveen Gupta

 

Praveen.jpg

 

Innovation and Six Sigma Trainer and Consultant

Director, Center for Innovation Science and Applications at Illinois Institute of Technology
President at Accelper Consulting

LinkedIn Profile

I interviewed Praveen Gupta, the Director of Innovation Science and Applications at IIT, School of Applied Technology and also the adjunct faculty for teaching innovation classes. Praveen is an internationally recognized thought leader in Process Management, Corporate Performance, Six Sigma and Innovation. He has also authored many books regarding business innovation in the 21st century. Praveen is the President of Accelper Consulting, which is an operations management consulting firm.

 

 

 

I understand you have experience working with companies in Mexico. What kind of work you have done with companies or institutions in Mexico?

 

We have worked with companies in San Carlos and other places where we have helped them align their manufacturing processes with the companies in Chicago and other areas in the US. We have found that people in Mexico are fun to work with and have a very strong desire to excel in manufacturing. I think it is great for American companies utilizing additional resources in Mexico, not at the cost of manufacturing capabilities in the USA, but to supplement manufacturing in the USA.

 

Recently, we have been working universities to bring our education on innovation in Mexico. We were so surprised that this was the first university where the President has committed to have the entire full time faculty to be trained in education to be innovative educators. I think it is a great commitment by the university. We are excited to be working with the universities in Mexico and companies in Mexico because it is an enriching and rewarding experience.

 

What kind of differences and similarities you have observed among companies in Mexico and USA?

 

In any evolving and developing economy the initial focus is on reproducibility in manufacturing. It is just like the USA for years where the focus was on manufacturing. Similarly, in Mexico the focus is on manufacturing. As the competency in manufacturing is achieved it leads to product innovations.

 

We find that in the USA companies are more focused on creating new products, new services where people are competing globally for the big market share. They have to keep up with the speed of customer demand and they may not be able to manufacture competitively if they just manufacture in the USA.

 

We have to supplement our manufacturing capabilities in the USA with the manufacturing capabilities in Mexico. The benefits of working with Mexico are that it is next door in the same time zone and at least there is some familiarity of the cultures between the two nations.

 

 

I recognize current focus is innovation. Can you share your innovation recent innovation experience in Mexico?

 

Product Life Cycles are shrinking. Companies in the USA have a challenge to produce new products faster and better. Companies in Mexico have a challenge to develop new manufacturing capabilities faster at the production level, not just the prototype level. Both of these economies and corporations in both countries have to focus on how they can bring in competency in innovation in-house so that they can quickly develop innovative solutions in product design, manufacturing or information technology – rapidly to meet the customer's demands and to sustain profitability.

 

How can innovation help in designing sourcing solutions in USA and Mexico?

 

Sourcing is the right approach when two companies work together. Outsourcing or Offshoring is just a name given to suppliers or partners that are not on the mainland USA. In a global economy offshoring and outsourcing means going to some other planet. We are not talking about another planet. We are talking about a next door neighbor.

 

What we have to look at is what are the constraints in the USA in reproducing the products quickly and what are the strengths in the USA that would allow us to produce quickly. Similarly, we need to learn in Mexico what are the strengths in supporting new product development or information technology or manufacturability? What are the opportunities or weaknesses that could be addressed?  It is looking at the strengths and weaknesses of both countries and the constraints. We need to find a way to optimize them and take an innovative approach to developing manufacturing design and development solutions. Both companies have some challenges. For example, in the USA the development and design process could be much better than it is today. I think manufacturing in Mexico has been very good but there is room for improvement. Some things they can do to improve include improving communication with American companies, providing more timely responses and better align with the needs of management and the mindset. I think that will create a more cohesive approach to helping companies in both countries. That is a very innovative approach.

 

What kind of relationship can be useful between corporations in US and Mexico?

 

We have learned that with any team one and one should not become two; one and one should become eleven. If you put one next to the one it becomes eleven. Similarly, it is not a zero sum game for companies in Mexico and companies in the USA. It is the eleven game. You have to basically multiply by an order of magnitude the capabilities of each other so that you both benefit tremendously.

 

About Praveen Gupta

 

Praveen.jpg

 

Innovation and Six Sigma Trainer and Consultant

Director, Center for Innovation Science and Applications at Illinois Institute of Technology
President at Accelper Consulting

LinkedIn Profile

I interviewed Lawrence Heim, Director EHS/Environmental Audit Programs, Conflict Minerals and Sustainability at The Elm Consulting Group International, LLC Lawrence shared this thoughts on the OECD's latest report on conflict minerals and the forum on implementation of due diligence in the 3Ts supply chain.

 

 

THOUGHTS ON THE DOWNSTREAM REPORT

 

Links to the reports:

 


As a general comment, the report offers no real surprises and reflects what we would consider an expected evolution of any new management system. And it is consistent with the predictions we made back in April about what to expect in the report– basically there has been progress in the easy areas, less so for more complicated areas and a significant amount of progress has been delayed due to the lack of a final rule from SEC.

 

Even so, there are a few interesting bits.

 

77% of the pilot participants are in the electronics sector and – although not reflected in the report itself – firms outside of this sector are concerned that their perspectives may not be the same.

 

Challenges continue with smelter identification/engagement because many affected companies do not have direct relationships with smelters.  It is noteworthy that smelter lists aggregated by EICC from participating companies show approximately a 30:1 ratio of invalid smelter names to valid ones before the data is validated.

 

Although data collection is somewhat automated through the use of the EICC Template and similar electronic tools, significant manual effort is still needed to review and validate the incoming responses.

 

Concerns about anti-trust are preventing industry-wide cooperation and information sharing – perhaps the first time we have seen this matter stated directly, although it has certainly been discussed openly for some time by many.

 

The report also highlighted “critical obstacles for utilizing the CFS as the primary tool for verifying smelters”.  Strikingly, smelter companies who contributed to the report stated that they “do not have enough customers requesting that they join the CFS”.  The report then goes on to recommend that customers demand that their smelters be audited.

 

Interestingly, the report appears to indicate that REACH and RoHS were brought up by only a single participant.  It isn’t completely clear in the report, but this could possibly indicate that the overlap between REACH/RoHS and conflict minerals programs is not as meaningful as some have thought and that early comparisons of conflict minerals programs and REACH/RoHS may not prove to be particularly instructive.  Which is pretty much what a number of stakeholders and industry associations have held for some time due to the differences between the legal requirements.

 

One matter we continue to believe is not adequately recognized or addressed is the importance of the quality of auditors, the need for oversight and accreditation, and clear definition of what constitutes an “audit” versus other types of less formalized site visits (although that point may be more relevant in the upstream context).  As a matter of fact, we specifically reported on this in relation to the Solutions for Hope Project.

 


THOUGHTS ON THE UPSTREAM REPORT

 

At a high level, the data gaps brought forward in the cycle 2 upstream report may raise questions when that information is compared to certain aspects of the downstream report and what the CFS audits reflect.

 

When you really get down to it, the credibility of information generated by upstream audits must be solid enough to allow reasonable reliance by downstream users of the information.

 

But even realizing that there is not a direct or 1-for-1 relationship between the upstream and downstream Pilot program participants, the trends we observed in Cycle 2 reports come across as somewhat divergent in that the downstream report generally projects positive program implementation results, while the upstream report presents a meaningful number of participants not collecting or maintaining key information on which due diligence relies.  This seems somewhat inconsistent.

 

There are at least 4 separate audit processes currently envisioned between the mine and the smelter, but the information presented in the Cycle 2 report does not instill confidence about what those audits would reveal today – assuming they would be undertaken in a true audit-like manner, rather than being treated as something less formal.  The report even mentions that the participants themselves are confused by the number and scope of site visits they are undergoing and whether those are “audits”, “reviews” or “assessments”.

 

And similar what we noted about audits in the downstream supply chain, the report illustrates and points out the need for strong and consistent audit standards and auditor qualifications in upstream due diligence, as well as the need for clarity in defining what an “audit” is.

 

This could have major implications to downstream audit processes that choose to incorporate or rely on upstream components within their own scopes because those downstream audits may rely on potentially inadequate upstream audit reports or possibly even force companies to conduct their own upstream audit to achieve a level of reliability/credibility that allows appropriate reliance.

 

That is the primary reason we are working to develop and deliver in the region an auditor training program to build pragmatic capacity and understanding for stakeholders, companies and potential auditors; to help bring consistency of audit standards/practices and reduce gaps compared to more rigorous audit standards/auditor qualifications against which the upstream audits are likely to be judged (such as SEC and the International Auditing and Assurance Standards Board).

 

About Lawrence Heim

 

Lawrence_Heim.jpg

 

Senior Leadership in EHS/Environmental Auditing, Conflict Minerals and Sustainability

LinkedIn Profile

 

The Elm Consulting Group International was founded in 2001. They focus  on environmental health, safety and  sustainability program development,  implementation and audit programs.  They focus on independence relative  to all of their work, including and  especially audit programs. The  company works very carefully to  maintain that independence.

I interviewed Rosanne Dausilo PhD who is an industrial psychologist by profession and is currently a consultant to the contact center industry. She is known as the champion for the human in a very high tech world. Rosanne is a customer  service expert and has written seven books on the topic. She is the President of Human Technologies Global which provides world class customer service skills training with the option of university certification from Purdue Center for Customer Driven Quality. They have a really popular complimentary newsletter which is sent out once a week on how to keep customer service up a notch at  http://www.humantechtips.com Coincidentally, she also writes a monthly column for Near Shore Americas, as such she is very familiar with nearshoring.

 

 

Role of customer service in nearshoring

 

Rosanne thinks customer service is paramount in terms of nearshoring and she thinks the same thing for off-shoring, as well as in the US. This is because in today's competitive environment what separates one company from another is not its product or service, because we have to have good products or services in order to be in business today. What really separates the companies is the relationship with the customer.  The call center has this awesome responsibility. It is usually the lowest paid person on the food chain.

 

Rosanne walks around with the flag saying “don't forget the people”. Customer service is terribly important. Without customers there wouldn't be business and without the service there wouldn't be any customers.

 

Improving customer service when doing nearshoring

 

Rosanne is a big proponent of training. She thinks training improves nearshoring and assumptions are made. People think that if people can speak they are communicating, which is absolutely not true. Communicating means that a message was sent, it was received and it was understood. This is extremely important in nearshoring.

 

Since most nearshoring is dominated by large Western cultures, distinctly Hispanic, accent neutralization is sometimes necessary because there are traces of accent. People need to be able to articulate. There are common jargons that need to be learned germaine to the customer. We assume that because customers are speaking English that they are all the same. However, cultures are different just in the US, for example. An upset customer from Texas or the south expresses themselves very differently than someone in New York.

 

Another thing that needs improving is listening. Because there are so many metrics in the contact center environment that instead of listening to what is being said so that they can actually help the customer, they are listening for the pause to jump in and take them where they think they want to go, which may not be where they want to go at all because they don't want to have their metrics go against them. If you are listening for the pause, you are not listening to the customer.

 

Main customer service issues to consider when nearshoring

 

Rosanne thinks it is difficult to have a call center without taking care of your people. Customers don't care about what you know until they know you care and Rosanne thinks employees are the same way. Some of the issues to her mind are:

 

  1. Are they invested in the outcome? They are not working for the end-user so are they invested in the outcome? A way to get around or test that is to do benchmarking against yourself before a project starts, 3 months later and 6 months later.

  2. What is the value system of the people you are hiring?

  3. What is the work ethic of the people you are hiring? It may not be the same as what you have.

  4. What motivates them?

 

In the same way as you are considering who is the customer, what languages are spoken, what geographic area is being served; you also need to know who are your employees. What motivates them? The number one motivator in the top 10 list is not money but acknowledgement for a job well done.

 

Immediately in a conversation people should establish their expertise and professionalism. They should offer options, especially if the answer is no. “Sorry, I can't do what you are asking, but here is what I can do...A,B or C, which works best for you”. Diffuse any upset if and when necessary and escalate.

 

Rosanne remembers doing some escalating at a client and they were not allowed to transfer calls that would go against them. As a result they did everything to hold onto that person until the call went down the dumper.

 

It is also very important to take ownership of the call, rather than passing it off. What ever happened up  until right now “my name is Rosanne and I will take care of you moving forward”. You are assuring people. Customers don't care where the call center is located, as long as they are understood and taken care of in a prompt courteous manner and they are treating with dignity and respect.

 

Importance of customer service awareness in the supply chain

 

There are so many touch points for a customer. Some are in front face to face, some are over chat and some are back office. It is a process and everyone needs to be a part of the process. The left hand needs to know what the right hand is doing. Rosanne did training for a food company where people would call up the call center and the call center was not allowed to transfer the call. As a result, the would send it over to the credit department. The only way they would know it was actually being handled was if they didn't get a second call on it. Meanwhile, the call would go to the credit department who may not have liked the tone of voice and would put it to the bottom of the list.

 

When it was time to do the training Rosanne suggested that every facet be in there; shipping and handling, credit and billing, dispatch and everyone who was a touch point to a customer. By the end of the training the attitude was not adversarial, but was supportive and made a difference in the flow of the customer's experience, not to mention that there was a positive outcome.

 

 

About Rosanne Dausilio PhD

 

rosanne.jpg

 

Customer Service Expert, Industrial Psychologist,

Master Trainer, Keynote Speaker, Coach

President of Human Technologies Global

LinkedIn Profile

I interviewed Charles M. Intrieri (Chuck Intrieri) who discussed the Supplier Day concept. He started his career at the Schwinn Bicycle Company where he worked for 12 years as a manager in International Purchasing, Overseas and Importing. Chuck was a value analysis group leader for cost reduction.

 

 

What is a Supplier Day?

 

A supplier day is a concept where you bring in your main suppliers either by commodity or critical suppliers for collaboration and continuous improvement. You also tap the suppliers for their knowledge, cost reduction and quality improvement.

 

What process is used to begin a Supplier Day?

 

A letter by the coordinator who is chosen and each supplier is sent an agenda outlining hour by hour what will occur from 9am to 2pm. The agenda is set. Attached to that letter is a Value Analysis Questionnaire where you ask the supplier for questions on ideas they may have to decrease cost and yet maintain and never jeopardize quality. They are the experts in the field and they should come forward with some cost reduction ideas for you, if the right questions are asked (attached to the letter with the agenda on it).

 

Expected results

 

What happens is they would take your part that you would buy from them. They would see the part and if they could eliminate some processes in their plant to reduce the cost. They can see if other materials can be used. They can see if a standard part can be used in place of a specialized part. They can suggest finishes that are alternatives, rather than the finishes you suggest. They take a look at your specifications and look at alternatives to reduce cost but not jeopardize quality.

 

Benefits of Collaboration

 

Collaboration is the very essence to Supplier Day. You want to collaborate, trust and work with your suppliers. I believe there should not ever be a pounding on the table for cost reduction, but rather a discussion and systematic approach to cost reduction and collaboration.

 

You can talk about long term contracts. You can talk about trust between each other. You can talk about how you can improve continuously together and what their new products are and how that might fit into your future growth. You need them as much as they need you. It is a collaboration of trust and understanding.

 

How does it end?

 

After a plant tour and a one-on-one discussion with each supplier to review their value analysis ideas, contracts and collaboration. Everyone returns back to the conference room and the coordinator wraps up the meeting after the supplier has had a chance to speak and comment about the day's meeting. Before they leave he gives them the card that states you would like their input about the meeting; how it could be improved, changed or critiqued. That way, you can continuously improve the supplier day conference.

 

About Chuck Intrieri

 

Chuck_Intrieri.jpg

 

World Class Logistics/3PL/Distribution VOC Consultant

Management Consultant

World Class Companies

LinkedIn Profile

I interviewed Claire McEachern who is the Founder and Principle at 2 Miles Consulting which focuses on Life Cycle Analysis for manufacturers. She received her bachelors degree in Sociology in 2004. Since then she as worked primarily within the waste sector. Her first long term assignment after undergrad was with a proprietary software company that provided solutions to employment services and Department of Defense contracts within the waste sector. Through this she became interested in neighborhood design and community design. Claire went to graduate school at Philadelphia University and received her degree in sustainable design. She then spent a year working at TerraCycle where she learned about waste in consumer markets.

 

 

Social consumerism and energy waste

 

As a society we are consuming knowledge from social media and is participating on Twitter, LinkedIn etc. Technology has changed the face of consumerism. It is great for sustainable and supply chain issues because there is less physical waste. With social consumerism we are buying the technology products which introduces a whole new sector of waste called 'e-waste'.

 

 

Examples

 

A construction waste management company in Philadelphia is a good example. One good place to look is in the built environment. When you get into the build environment when you are building their are tons of waste. This specific company takes what could be considered construction waste and sorts and provides for other companies to use. For example, excess tiling from a large commercial building project can be reclaimed and made into either a piece of art or you re-tile a kitchen, garden shed, compost, etc.

 

Another great example is horticulture and permaculture where they are reusing large salad dressing barrels for collecting rain water. This can be done with wine barrels, bear barrels etc. They can be used for gardening and more which also conserves water and improves quality of life.

 

Recommendations for supply chain professionals

 

 

Supply chain professionals can get started by talking with people outside their field and department. Go out to other people's events. Talk to people who are already engaged in sustainability to see how you can help to provide solutions. Go out and see what they are doing. Try to be creative about it. Innovation and creativity is important.

 

There is a planning model where you bring people together from various functions and various stakeholders. They are not necessarily sustainability professionals, but when you get them in the room talking about what they need to create and what are the different pieces of the puzzle, you end up with a better result that meets the needs of everyone involved. You get the social equity piece into the puzzle.

 

By simply going out and asking your neighbors it is easier to see what is and isn't working when looking from the outside.

 

Recommended Links

 

http://www.looptworks.com

http://www.terracycle.net

http://concorde2000.com

http://www.sustainext.org

http://rairphilly.org/

http://www.revolutionrecovery.com/ (formerly known as Construction Waste Management)

http://www.philau.edu/green/index.html

 

About Claire McEachern

 

Claire_mceachern.jpg

 

Founder & Principal
2 Miles

LinkedIn Profile

I interviewed Kevin Mendel, a former Director - Home Delivery at Best Buy Co who discussed supply chain visibility and the customer experience.

 

 

Why visibility is important

 

Most recently Kevin was with a company managing home delivery. From a home delivery perspective customers are expecting more today than ever. In many cases they are carrying their life around in their hands and are extremely busy. Studies he has seen in the past over index on on-time delivery of products. Today, everything is available via some technological device of some kind, whether online, on your phone etc. Customers want to know in many cases when the delivery is being made, where it is right now and are you going to be on time?

 

If you look at what Dominos Pizza can do, you can track the orders by stage online. It might not be your pizza but it is based on the time of when an order is taken to when it will be delivered. That is almost what the customer is coming to expect from a delivery service, having the ability to login, get text messaging, go to a website of some kind and see where they are in the delivery function and when they can expect delivery.

 

From an inbound shipment or outbound shipment, visibility from an inventory perspective is very important. Companies are increasingly buying according to the need when they have to have the product and can't afford lateness for arriving products. Therefore, visibility of the shipment is critical for planning. The forecasting is for when I will need more or when the next shipment will come in.

 

Kevin thinks RFID is a great technology. However, there is a trade off in the cost versus value. His previous employer tested RFID tags for video games and cds. They found value in helping to find mis-categorized  or mis-filed products, but the cost benefit analysis wasn't that positive. Kevin thinks RFID and the data tags in some form have a place in the visibility of inventory but there are some issues with security. Yet, there are some industries which are widely adopting the RFID technologies.

 


How visibility impacts the customer experience

 

Kevin thinks it impacts the customer experience tremendously. If you think about you purchasing something online or in a store and being told a delivery date but the delivery date arrives and your product still hasn't arrive or you don't know if it is coming. As a customer you tend to get upset. Customers are not necessarily about speed anymore. They are really about the expectation and accountability.

 

If customers were more about speed there would be less sales going to the Internet. People want price and value. From a home delivery perspective you can track a FedEx shipment online, but the loss of that visibility is when it is out for delivery. You see all of the facilities it has gone through but you don't know what time it is coming.

 

The next phase of the visibility really need to be on the day of delivery. How do you incorporate text messaging with periodic updates. That would help narrow your delivery window. Throughout the day if there is a way to narrow that window or if you could log into a website and get text messaging saying your order is now a different more precise time. It helps narrow it. From a consumer perspective it allows them to be much more efficient and to manage their time much better.

 

Online visibility to track the route of the delivery and to see if they are running behind or early is what the customer is coming to expect. As we give consumers more visibility they will require day of updates. Whether it is UPS, FedEx or Joe's home delivery service, it is something the customer is coming to expect.


Role of technology

 

Kevin thinks technology plays a huge role. People more than every today are carrying their life with them in the palm of their hand. They don't use land lines anymore. They are linking everything to that smart phone. There are applications for everything you would every want to do. Think about an application on your phone that may be specific to a company or Amazon, Lowes, or Home Depot. It may be a simple application that goes out and links everybody into that application for anything you have ordered or delivered.

 

You could go in through that application, type in your order number, last name and your zip code and whatever security features you have. It would have a list of everything you ordered from online or a store where you are waiting for home delivery. Everything would be incorporated from that application right into your phone. The phone is really becoming the center of communication in many people's lives. Whether you are a bricks and mortar retailer or a dot com retailer, somehow you need to tap into that vehicle for immediate and to the minute updates of where your product is. It is becoming a customer expectation. Anytime you can consolidate all of that information into one box that is the winner.

 

There is an application out there right now called Mint.com. Mint takes all of your accounts, whether credit card, home equity loans, bank accounts etc and links them into one. You can see at any time what your financial position is with all of your investments.

 

What if you could have the same thing for people who order online and expect home deliveries? They could see everything they ordered and where it is in the pipeline. Kevin thinks that is the ultimate experience for the consumer.

 

About Kevin Mendel

 

kevinmendel.jpgKevin has been in supply chain for over 20 years, including demand planning and forecasting. He has experience in domestic transportation operations and has done international program negotiations, sourcing and strategy development both in a transportation and home delivery role. Most recently he worked with Final Mile Home Delivery where he thinks they probably had the biggest accolades from a customer experience and visibility perspective.

 

LinkedIn Profile

I interviewed Martin Keyser, Purchasing Contract/Consulting at Material Management Consulting. He discussed the importance of being loyal to vendors and why. Every transaction has to be a win/win.

 

 

1.Please provide a brief background of yourself

 

I started an industrial Tool and Supply company in 1984, selling tools, fasteners and abrasives to companies that made their own products.

 

An example is a customer who made guitars. Not only did I find just the right abrasives
to help make the guitars but also just the right screws that went into the guitar.

 

I sold my business in 2002, and thought I would be retired but found I didn’t enjoy retirement so I decided to use my expertise and do contract assignments for companies that needed help in their Materials Departments.

 

I’ve worked for a variety of companies from small shops to multi-department and multi-branch corporations.  My Purchasing experience includes the tools and supplies you’d find in any machine shop, electronic and electrical components, Adhesives Chemicals/Oil Machined Parts/Castings/Forgings/Sheet Metal to print Stationery/Printing  

 

2. Why is vendor loyalty important?

 

The kind of loyalty I’m talking about is the purchasing agent being loyal to his vendor. There is always going to be another vendor who is just a little more hungry and is willing to sell a similar product for less. I usually wouldn’t change a vendor if they were doing a good job for my company just over price. Especially if the difference was insignificant.Too, I have learned that every item has a price range, below, which, you are paying and getting nothing and above which, you are paying and getting nothing more.

 

So, factoring in things like delivery on time, and how fast do they solve problems is worth something too. For example, if necessary, are they willing to delay a shipment? Can they deliver sooner, if necessary?  Things like that.

 

I think being loyal to a vendor also means letting him make a profit. If you force him to not make money on the deal, will he be in business when you need to order the part again?  And, if you drove him out of business, can you find someone else willing to sell the product at that price?  If not, can your company absorb the higher price without needing to raise the price of their product and, what if they entered into an agreement where the price cannot be raised. You can see the problems that can be caused if you believe your vendor has to loose for you to win.  A Purchasing Agent in LinkedIn said she looks for Win-Win solutions and I agree.

 

3. How do you benefit by being loyal to your vendor?

 

I was working for a company where the biggest purchases was printed matter.  The economy was down and a printer told me he was just going to quote based upon just keeping his people busy and his machines running. I told him that I wanted him to make a profit. Because there was going to be a day when he had to choose whether to throw our order on his machine or someone else’s order where he was making a profit.  Which order do you think he would choose?  And, without his merchandise, everything in my company stopped.

 

Too, every purchasing agent has experienced a day when he needed a favor from his vendor.At that moment do you want to be his best customer or his worst?  For me, it was between Christmas and New Years and the factory had a skeleton crew. My customer absolutely needed a part the first week of January and he got it because we  paid our bills on time, and didn’t throw our weight around.

 

Too, loyalty to your vendor means being honest with him.  Do you keep your vendor in the loop regarding the part becoming obsolete?  Do you take the parts off his shelf when you change them?  I once got permission from engineering to change a screw from a special to a standard, saving us $25,000 per year.  But before I ordered the standard screw, from the same vendor, by the way, I took all the specials off his shelf.

 

In short, do you do what you say you’ll do?  Can your word be trusted?

 

4. Who is seeing good results?

 

I have always seen good results and would guess every company would see good results if their Purchasing Agent realizes that every transaction has to be win-win. I would also hope that being honest and fair is part of the corporate culture.

 

About Martin Keyser

 

martin.jpg

 

Sr. Buyer
Practicing Constant Improvement Constantly

LinkedIn Profile

I interviewed Craig Jolly who discussed Demand Driven Material Requirements Planning at the Certified Demand Driven Planner (CDDP) Event in Chicago on June 1st. Craig was at the Demand Driven MRP event to learn more about the development of the principles that have evolved over time and how they are applied beyond the food business. They want to take advantage of some of the learning that has happened out there. Craig's company only uses Demand Driven MRP for few segments of their business. However, he thinks they can benefit more by expanding it to other market areas and use it within their company more for manufactured parts. Currently, they only use it for purchased parts.

 

 

Because Oregon Freeze Dry has a make-to-stock business where they have to have product available when the customer wants they set inventory levels which they monitor through a series of staggered buffers. They monitor their raw materials so that they can always produce what they need to at the time they need. Based on their lead time through their plants they figure out how much finished goods inventory they need to hold. Everything is pull-based from there. They react to market demand as they sell more of one item they rebuild that item or not build things as frequently for things that don't sell as much. It is much more market based and has allowed their sales to grow by large amounts over the last decade, but their inventory has not grown as much. They have been able to provide the same level of service.

 

Craig thinks the exciting thing from their standpoint is being able to feel a sense of control. While the market may fluctuate from year to year they are very susceptible to outside forces like hurricanes, Y2K was a big one for them, the Mayan Calendar, Bird Flu, SARS or any kind of scare out there that makes people want to think about food security and being able to store food for them and their families.

 

The process the company has in place has allowed them to react to that more easily than they would have in the past because they are cushioned by using their buffer inventories the way they have. It makes them able to respond quickly without investing a lot of extra capital and putting a lot of wasted effort into it.

 

Recommendations

 

The concept is pretty sound. It works for anybody that has any combination of make-to-order and make-to-stock business. The important part is thinking through where to hold inventory in your system, where that inventory benefits you in terms of lead time and protection of key resources and customer responsiveness. It is the thinking through that is important. It is not an off-the-shelf solution that applies right out of the box for everyone. You have to think about how it fits your business, how it applies to your specific situations and make decisions by walking through the process methodically and applying it where you get the most benefit for your particular company.

 

There are a variety of companies using Demand Driven MRP, including aerospace companies, manufacturing, food products, high tech. You get a variety of industries and environments where they face similar problems and are all working on the same types of things. There are a lot of companies that are in the fairly early stages. There are some consumer product companies that are implementing this across many plants throughout the world. There are very heavy machining companies and manufacturing companies that have deep bills of materials, very complex large products with lots of parts numbers.

 

Craig has a lot of faith in Carol and Chad and the entire thinking process they have gone through. It is not something that was just pulled out of the air. It is something that has been developed over many years of research and working with companies. It is a practical solution that has evolved from the ground up. It is theory put into practice based on the actual results they have really achieved and benefits they have seen in the real world. There is a lot to this which Craig thinks people can take advantage of if they just take the time to look into it and figure out how it fits.

 

Just last year Chad Smith and Carol Ptak founded Demand Driven Institute in anticipation of the book 'Orlicky's Material Requirements Planning, Third Edition (McGraw-Hill 2011)' coming out, as well as anticipation of people wanting to know more.

 

About Craig Jolly

 

Craig Jolly is the Manufacturing and Information Systems Manager for Oregon Freeze Dry. They are the largest custom freeze dryer in the world. They use the replenishment principles on some of their make-to-stock business, Mountain House is their brand name. The company sells a line of backpacking food that has 20-30 different flavors and several different package sizes. It is a make-to-stock business for them so they maintain finished goods inventory in their warehouse and ship all around the country, mostly to outdoor retailers, sporting goods stores, mom and pop shops, etc. The company needs to have the inventory in stock when they call and ask for it. Customer tolerance times are very low. When an order is placed they are expected to ship it within the next day or two. The company sells online via retail over the Internet. They do small orders for one case all the way to truckload quantities. They sell to big club stores and grocery stores, etc all the way through the supply chain.

I interviewed Steve Hopper who has spent the last 25 years focused on improving warehousing, distribution and logistics supply chain operations. He is an industrial engineer and has been involved in everything related to streamlining processes in warehousing, distribution and logistics operations; from material handling systems to warehouse management systems, facility design & planning, network optimization etc. He has worked with a lot of clients over the last few years, helping them to drive down costs and improve performance levels in their distribution operations.

 

 

How can you simplify processes in the distribution center?

 

I found that over the years there is a lot of 'meat on the bone' in the distribution center. Most people don't realize how much of an opportunity there really is to streamline things at the distribution center level. By doing that it results in a couple of significant benefits to the company:

 

SECS.pngCost reduction – we all know how important that is especially these days in the competitive economy we live in, with the challenges we face from a global economy standpoint where labor costs continue to increase. With these kinds of things going on it is very important to be competitive from a cost standpoint, but there are other benefits as well associated with customer service levels improving; being able to do more for the customer and being more responsive to the customer, etc.

 

When it comes to specific process improvements, typically I start by jokingly say I think about sex. What I mean by that is SECS which is an acronym for Simplify, Eliminate, Combine and Standardize. Doing that process where you examine an operation in a distribution center, whether at the macro level; it could be a facility wide or even network wide process you will look at, or it could be at the micro level where you are actually looking at what one operator does when they perform their task.

 

S- The first step is to simplify. In other words look at the activity and try to figure out how we can make that activity occur in fewer steps, to simplify work that is done, to use the right tool for the job.

 

E- The second step is eliminate. In that process we are eliminating wasted motion. We are eliminating wasted steps in the process that don't need to happen. Very often we will flow chart out a process and for each step of that process we will ask ourselves “is this really adding value to the process or is it some Bureaucratic step taking place and have people really thought about why they do this particular step?”

 

C- The next step is combine, meaning looking at different steps in the process and figuring out what can be done at the same time. Very often we find that two different things are going on that are being done in a linear fashion when frankly they could be done in parallel, saving time in the process.

 

S- Standardize. Once we have really simplified the process, making that process a standard process so that people can be trained in how to use the process. They understand what the standard process is. They can be held accountable for the process. It makes the overall operation on a repetitive basis be much more efficient.

 

These are really the steps we use in the distribution center to simplify an operation.

 

What specific impact can business process simplification and improvement at the DC have on a business?

 

I mentioned the cost benefits a little earlier. That is a really big one. I don't believe in the one size fits all answer to a question like that but it is very common when I go into a distribution operation and just look at labor alone, without even getting into some of the other benefits of improvement in terms of space or customer service levels etc. Just looking at labor alone I typically find that if an operation hasn't standardized their processes and looked at things like engineered labor standards and haven't looked at these standard operating procedures (SOPs) to really streamline the process. There is probably an order of magnitude of 25% or more of labor productivity that can be available. That can translate into some really significant dollars when you get into large distribution operations.

 

What we are talking about here is the cost factor. There are also revenue impacts on these kinds of approaches where if you can process orders out in one day rather than two days it can have a very significant impact on your sales. The more streamlined the distribution center operation is the more money you will save not only in terms of the process itself but also the more money you can bring in on the top line as a result of improved sales.

 

Can you provide an example of a DC process that needed simplification?

 

There are a lot of them! I will just use a couple of examples. Very often I will see at the network level transportation networks that have multiple steps in the network that frankly can be reduced in terms of the steps.

 

  1. Shipping directly from the vendor to the store. You bypass the DC altogether. Many companies have not taken the time to analyze what their networks look like, where the demand and supply is and processes and activities that need to take place in between. By doing a DC bypass they can actually save quite a bit of money in their transportation, labor etc.

  2. Another example on a more micro-level was that I was at a major food company and was watching the way they were unloading their trucks. I happened to notice that they were re-assembling pallets at the receiving dock that came from their own plants. They were re-assembling from a top tier that had been stripped down on top of the stretch wrap pallets on the trailer. They began asking questions and realized that they thought they were saving money by doing an extra layer on top of these stretch wrapped pallets in the trailers. They thought they were saving money by cubing out the trailers to the tune of several million dollars per year. But they never looked at the impact on labor and space at the DC level and at the manufacturing plant. They could have well been spending ten million dollars a year or more than they were saving in transportation costs. Looking at things holistically is another thing I find a lot of issues around. Companies are not taking the time to look at processes holistically. They tend to get tunnel vision and look at one particular element of the process and not the impact on the overall operation.

  3. There are a lot of ways companies can streamline things and be much better off for it.

 

How can a WMS software help improve processes at the DC?

 

One of the strengths of a WMS is the idea of standardizing process. Most major WMS are set up and configured for the operation and in effect what you are doing inside the WMS is that you are setting up a standard process that the system will drive. The system will direct operators to perform according to the process. That can be a double edged sword. If a process is set up poorly in the WMS you may be standardizing a bad process. I call that 'paving the cow path'.  You don't want to do that.

 

Assuming you have taken the time to steamline the process and figure out how to use that concept of SECS (Simplify, Eliminate, Combine and Standardize). Once you develop that and configure that in the WMS, the WMS will drive the processes to fit that, assuring that you are following the best process for every operator that is using the system. WMS's really have a strong capability to do that.

 

If a labor management system is used in conjunction with the WMS that can add additional value in the process because now you are not only driving the process with the WMS and hopefully people are using the correct process, but are also actually tracking the labor data by associate in the warehouse. You are being able to reward people that are performing well and following the process. You can use it in discipline as well and work with the associates who are not following the process.

 

All in all you end up with a big opportunity for labor savings and process improvement.

 

STEPHEN T. HOPPER, P.E.

Founding Principal

Inviscid Consulting, LLC

Phone:  +1 404.832.LEAN (+1 404.832.5326)

Email:  steve.hopper@inviscidconsulting.com

LinkedIn Profile

I interviewed Daniel Feiman from BuildItBackwards.com. He discussed a Supply Chain Management Simulation tool he uses with companies to really help them understand not only the real benefits to them, their customers and suppliers but also incorporating the tools and philosophy of continuous process improvement.

 

 

What we do is first define all of our terms. We talk about what is a real supply chain? What is the purpose of a supply chain? and who are the participants in the supply chain?. As we said, it’s from us to our suppliers and our supplier's suppliers. It is also from us to our customers and our customer's customers.

 

Once we understand this there is a simulation that we run for companies. It literally means that different participants take different roles; manufacturer, wholesaler, distributor, and retailer. We run through an operation for each of these in a simple linear supply chain for 52 consecutive weeks. As orders come in from the marketplace to the retailer, retailer to distributor to wholesaler and up to the manufacturer. They have to make decisions, place orders, manufacture the product, and make adjustments in real time. Without the communications between the parties which you normally would not have anyways.

 

The benefit is that we get to see on a very condensed board game, the challenges and problems with the typical supply chain. From that we can step back, look at all of the analytics and metrics, make decisions as to what went wrong, and create action plans for how we will fix it. A good portion of fixing the supply chain leads us directly into the discussion of continuous process improvement.

 

Here we start with what is our value stream. From the order coming in from the marketplace, through every process until we deliver something that the customer pays for. When we map the value stream we can see the tremendous waste in our organization. When we condense that down and eliminate that waste it adds a significant improvement to the bottom line.

 

We can take that one step further down. Now we look at the individual processes. We can go through process re-engineering, literally mapping the process, looking at the individual steps to refine, improve and re-engineer. We engage the process owner, the person who has taken on the responsibility to improve the process, the process users (those who use the process), the process suppliers (which are usually internal), the process customers who are likewise internal, and the process champion (the senior executive who is going to help facilitate this improvement).

 

We go through this and document and interview our suppliers to really help them understand what we need, why and how. We interview our customers to ask the same types of questions. This invariably improves the communication, which allows us to make some changes, which eliminate waste, which improve the processes, which improve our bottom line. That is what a supply chain management simulation is all about.

 

Its eliminating the waste, the unnecessary (the 8 deadly wastes) so that you can truly be more efficient, produce the end result with less inputs, and more effective. We can accomplish more of the goals that we set. That is the end result of a supply chain management simulation. It is highly effective and the ROI is very high.

 

About Daniel Feiman

 

Daniel  Feiman, MBA, CMC® and Visiting Professor, is the Founder and Managing  Director of Build It Backwards, a consulting and training firm based in  Redondo Beach, CA. He teaches “ordinary companies how to create  extraordinary results” by leveraging his expertise in Strategy, Finance  and Process. Mr. Feiman has provided expertise as a management  consultant for more than 16 years, after a long and very successful  career in commercial banking. He works internationally with cutting edge  start-up companies, as well as industry leading multi-national firms;  where he facilitates strategy, finance and process improvement projects,  improving business effectiveness in a wide range of industries.

 

Daniel  is an internationally recognized seminar leader who has worked with  firms such as Apple, Credit Suisse, Hilton Hotels, Institute for Supply  Management (ISM), Mattel, PEMEX (México), Promigas (Colombia), Reliance  (India), the Small Business Development Center (SBDC), TRW and the  University of Manchester (UK), among many others. Daniel is the  Publisher of the Build It Backwards series, and author of numerous  published articles, white papers (available at www.BuildItBackwards.com)  and business books. Daniel is also a reviewer for the New York Journal  of Books. He is adjunct faculty at the University of California, Los  Angeles (UCLA) Extension Department (since 1990) and the Visiting  Professor in the University of Huddersfield’s (UK) Business School. He  has also been interviewed on various television and radio shows. dsfeiman@BuildItBackwards.com

DanielFeiman.jpg

 

Managing Director

Build It Backwards

LinkedIn Profile

I interviewed Chad Smith, Dr. Charles Watts and Carol Ptak who discussed Demand Driven Material Requirements Planning at the Certified Demand Driven Planner (CDDP) Event in Chicago on June 1st.

 

 

Chad Smith: Why does MRP really need to change?

 

Dr. Charles Watts: In my mind I was thinking about 25 years ago being in a plant when the person would pull out a piece of paper in their back pocket. You would ask them how they are doing on inventory and there is some guy on the floor with a piece of paper he follows. I think it was a problem then. Now the dynamics of the whole environment have changed so much I don't even think people can use the sheet of paper in their back pocket anymore.

 

Carol Ptak: It just doesn't update fast enough! The reality is that when you first looked at computers when they were first invented people used them for tracking people (for census) and we tracked inventory. Therefore, the whole MRP planning line was built on the fact of inventory at the core. I think that is what is really rotten at the core today. For a company to be successful it isn't about inventory. It is about a new core of demand. It is about the customer, about what I need, when I need it, at a price I want to pay to be able to compete globally by being able to be faster and more efficient with the use of my resources to get a better return on capital employee.

 

Chad Smith: I think that is a great point. Companies focus on inventory and working capital as the primary issue and it has a bunch of disastrous bi-products. What we are saying here is to focus on demand, service and what matters, which is customers. The bi-product of that is actually lower working capital. It seems almost counter intuitive. If you focus on the working capital you don't get good service. If you focus on service Demand Driven MRP is going to let you get lower working capital.

 

Carol Ptak: Absolutely, because when you look at it and just say you are going to cut inventory, the easiest way to cut inventory is to reduce the inventory levels on the parts you are selling the most of, which sets you up for having a lot of shortages which means it is going to impact your revenue. You are reducing your inventory. It is dead inventory so it is really hard to reduce. You end up doing the exact opposite of what you are looking for.

 

Dr. Charles Watts: Some people say they think they will go to make to order. It is not 'make to order' it is 'make to demand'. It doesn't mean you make everything once the order comes in. There is a much different way and I think the Demand Driven MRP (DDMRP) system captures all of that.

 

Carol Ptak: It is that ability to sense and adapt more quickly to what is going on in the marketplace.

 

Chad Smith: What is different in DDMRP? From  my perspective, one of the first things we are starting out with is re-thinking where to place inventory, what to do with inventory, where can we break apart processes in a sensible manner to protect and compress lead times, to absorb or dampen variability? When we do those things good things happen with working capital like reductions and customer service.

 

I think another fundamental break we are having with the past is that we have a new demand component. If you try to run MPR today with sales orders you get into trouble. But we know that sales orders are much more reliable forecast than orders. DDMRP creates a mechanism in which you can actually run the sales orders through those places where we place that inventory to get the good lead times.


Finally, a big point for me is the idea of the execution side of the orders. They are moving the industry away from priority my due date and moving them into priority by buffer status. The fact that it is a mirage where priority and due date actually correspond with each other. In fact, most senior buyers and planners know that some things are due after others are actually more important today. With the MRP today you can't see it! All you get is a date.

 

Carol Ptak: Not only do you only get the date but you also very hidden on some things which are critically important, like I might have one part that is coming in late but I don't know it if I am the planner for the matching part. So I am here expediting and spending a lot of dollars, time and effort to try to get this thing in and it is sitting in inventory with dust collecting on the box while I am still waiting for this part to come in. The horizontal dependency is hidden in the current MRP.

 

Dr. Charles Watts: I think one of the things I like about this too is that I used to always kid around and tell people that if your boss is asking you what you are doing you tell him/her you are balancing inventory. The joke was that people would put the inventory to balance it across all of the things. What I like about DDMRP is that it picks those strategic points where to hold inventory. It tells you that inventory here and inventory there isn't the same thing.

 

Having a little bit of everything everywhere doesn't necessarily solve the problem. Having those strategic inventory positions that DDMRP does is really the key.

 

Carol Ptak: I think the biggest thing that changes with DDMRP is that it solved the problem that companies are really facing today which that whole issue of material synchronization. It is not just about balancing, it is how do I synchronize it such that I can change and adapt to the marketplace. It answers that issue. Those are tools we couldn't even perceive and we didn't need before. We are managing an entirely different environment today than when MRP was invented.

 

Chad Smith: Yes, we have more problems, more complex product structures, much more complicated supply “webs”...

 

Carol Ptak: Shorter customer tolerance, shorter product life cycles, more complicated products, more variety in products...

 

Chad Smith: The same synchronization issue becomes the real limitation. Conventional MRP was never conceived with these kinds of issues and requirements in mind. The next question is what has been the reaction from your perspective on the book and the method?

 

Carol Ptak: The reaction from the book at the method is that all of a sudden we have gone from being heretics to being mainstream. The number one reaction that I get from people is “well, we do part of that”. I think for the first time what is happening is there is a methodology that matches for the first time a planner's situation.

 

Chad Smith: Exactly, that is a good thing right. That means if you say you do some of that means you are experienced and goes according to your intuition. Now you need a codification for it. It needs to be transferable within the organization. We need to have some standards so that development can continue on. It can't just be isolated in a spreadsheet or a person who has 25 years of experience in their head. It is time to take the intuition and harvest it, and put it into a defined method.

 

I think the DDMRP at least from what I have seen, planners take to it very quickly because it does coincide with their intuition. Also, they can do more in less time.

 

Carol Ptak: It is. It is easy to understand. Everyone in the world understands red, yellow and green. Red in one country does not mean speed up. Green doesn't mean slow down. Those colors are well understood. It is very intuitive. It is matching some of the some of the things these companies and planners have been doing for years just to survive. They have been fighting against the current system because the current system doesn't do it the way they are doing it. They know if they do it according to the rules in the current system they are going to die.

 

Dr. Charles Watts: I was telling Carol, what I like about your approach is that you have systematically gone through with the lean and six sigma. We had done it by intuition. We knew we were combining all of these things but we never looked at each step and figured it out. That is what I like about what you have done, systematically gone and justified why you are doing every one of these things.

 

Chad Smith: Why do we call it Demand Driven MRP? I think it is first and foremost a planning solution. It still does generate material requirements planning but it does it in a much different way than conventional MRP. It is MRP but it is not conventional MRP.

 

Carol Ptak: I think the important thing is also that it is not just planning, it is also execution, which is a big difference between MRP, MRPII or ERP. None of those cover the execution side. The big key with Demand Driven MRP is that it is a closed loop fully codified approach to handling both planning and execution.

 

Charlie: I think it is great because when it is all together (I have done this before where we used the MRP materials but worked ways around that and used middle ware to pass information in and out). I think it is better if you can have it all integrated into one system that does your MRP and your Demand Driven part.

 

 

About Chad Smith

 

chad.jpgPartner

Demand Driven Institutehttp://www.demanddrivenmrp.com/

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Chad Smith was a co-founder of a company called Constraints Management Group in 1997. Before that he worked directly for Dr. Eli Goldratt. He has his roots planted firmly in the Theory of Constraints. As they grew the firm and took on larger clients they were forced to deal with the formal planning side because it was the number one impediment. They knew they couldn't just wipe it out. They had to solve the puzzle about how to make it work in a totally new environment centered around actual demand.

 

Just last year Chad and Carol Ptak founded Demand Driven Institute in anticipation of the book 'Orlicky's Material Requirements Planning, Third Edition (McGraw-Hill 2011)' coming out, as well as anticipation of people wanting to know more.

 

About Carol Ptak

 

carol.jpgPartner

Demand Driven Institute LLC

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Carol started out in manufacturing at minimum wage on the shop floor. She worked up to being a supervisor and finally a manager. Carol then left production and went into the consulting area for awhile. She ran into issues involving the fighting of the software. Then she went back work for a while at a software company – at IBM in technology and sales. She was then hired by Peoplesoft as their Vice President and Global Industry Executive being responsible for the company's entire software strategy where they coined the term 'Demand Driven' in 2003. They spent a great deal of money marketing the term, not that they had a fully baked solution underneath it. But they knew the direction of the solution.

 

Carol and Chad came together in 2007 when she was at the university teaching. They married the work that CMG was doing with some of the things in the market around Demand Driven and came up with an interesting solution writing the book together.

 

Prior to this Carol wrote a book on MRP and co-wrote one on ERP with Eli Goldratt. She took what she learned from that book and put it into the ERP book and they bought Demand Flow Technology. At the time she was at Peoplesoft Carol wrote a book on Lean called 'Quantum Leap, The Next Generation'. She pulled all of this work together which leverages all of those giants to stand on their shoulders to write the latest book 'Orlicky's Material Requirements Planning, Third Edition (McGraw-Hill 2011)'

 

About Dr. Charles Watts:

 

CharlesWatts.jpgCharlie has been a college professor for 30 years and entered the field by working at manufacturing businesses. He never realized that Orlicky's book written in 1975 because he used it in 1976 in college. He has been the executive director of education certification as ISCEA for roughly 8 years.

 

Professor of Operations

John Carroll University

Supply Chain Consulting

ISCEA

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I interviewed Mona Pearl who discussed how small and medium sized businesses in the US can become more competitive globally. Current and projected market growth is outside the US. The search is ongoing for markets that promise growth and new opportunities for businesses around the globe.image001.jpg

 

1. How can small and medium sized businesses in the US become more competitive globally?

 

The Challenge


It starts with a whole tweaking of the mindset: the U.S. is a huge country, but it’s not self-sufficient anymore. CEOs and other executives in charge of operations and growth need to look at the global market, because that’s the only chance for survival. And instead of feeling panic and fear, they should look at the global market as an opportunity.  Let’s stop peeking through the keyhole, open the door and step outside.  Engage, play and succeed.

 

The fact that the US market used to be the main playground for the middle market companies creates three main challenges:

 

A Global Mindset:  For many, global expansion is not even on their radar, and for many that consider this option, it seems that they don’t know how.  The rest of the world operates in different ways, and business across borders requires different tactics.

 

Many U.S. companies still consider going global an “option.” It’s not. Ready or not, almost every U.S. company is already competing with a foreign enterprise even right here on U.S. soil.  In a technologically connected world, the U.S. can no longer afford the luxury of global isolation, but learn to play in the sandbox and launch successful international ventures.

 

American businesses fail at a rate of three to four times the rate of other countries in their ability to expand globally.  Even worse, the majority of U.S. businesses never make an attempt. Of all the obstacles to success abroad, the greatest hurdle is simply mindset.  Our entrepreneurial drive, vision, and expertise just don’t compensate for our lack of global perspective, drive and success.

 

The fact is foreign based companies are taking advantage of the recent economic down turn and buying American businesses at fire sale prices.

 

The U.S. can no longer afford the luxury of global isolation, and companies must respond by developing effective globalization strategies and launching successful international ventures.

 

Lacking confidence due to the lack of global experience:  As the trade borders become seamless and the world becomes more dependent on technology, middle market executives must scramble to acquire the tools and skills necessary to survive and thrive in the increasingly competitive global market.  The new frontier is that there is no frontier, and how middle-market businesses respond to this reality may have a significant impact on the economy as a whole.  Savvy entrepreneurs will likely see opportunity where others see impasse.

 

Lack of resources:  The middle market is underserved when it comes to access to credit and other financial resources and programs and simply knowing their needs.  This is an underserved market that has the potential but not the attention and resources, like the middle child.  Time to reinvent the US economy, create the dots and then connect them.  Companies are at a point where they have to learn new rules of the game to remain relevant in the global economy.  Let’s focus on the opportunities the global economy presents, and how we can tap into them and thrive.  Not only survive.  The American ‘let’s do it’ attitude and spirit has never been just about surviving!

 

Focus on Success and Avoid Top Three Costly Mistakes


The opportunities for global expansion are infinite, and the potential for exponential growth is alluring; however, attaining success demands a well-conceived global expansion plan that is grounded in accomplishing specific corporate goals through the careful formulation of business development strategies.

 

Mistake 1: Lacking Clear Objectives


The reason to go global must come from a legitimate need to change that is based on accurate data, starting with the present and looking into the future. It begins with asking the right questions. Don’t skip this critical step. You can significantly increase your likelihood of success by researching the market and the competition and; setting clear objectives, timelines, milestones, and metrics and using this research to create a roadmap to success. And of course, all this information has to be analyzed and interpreted in context. Data alone will not suffice. Make sure you define the right target market(s) for your product or service and choose the appropriate mode of entry.

 

Mistake 2: Forgetting the Fundamental Importance of Cultural Differences


The differences that make all the difference are crucial to success.  Anyone can see the tip of the iceberg, but it takes a trained eye to see what’s hidden under the water.  Be sensitive to cultural nuances. I’ve witnessed many business transactions that come to a screeching halt and fall apart due to cultural misunderstandings and cultural ignorance. Don’t assume anything, and do your homework. Business people in an international business environment must not only be sensitive to differences in culture and language, but they must also learn to adopt the appropriate policies and strategies for coping with these differences.

 

Mistake 3: Underestimating the Time to Market for Your Product/Services


Don’t put expansion plans at risk by budgeting too short a timeline.  When this happens, inevitably, the business depletes available capital and the upfront investment of time and money is wasted while your international reputation is blemished.  Resist the temptation to be overly optimistic.  Look at the Ease of Doing Business (EODB) index for planning purposes, and focus on interpreting that information correctly and analyzing how it will affect your specific business plans. You cannot put a time frame on building relationships and trust.

 


2. How do we compete amid an environment of constant and rapid change?

 

In my book, “Grow Globally”, I explain and outline how US companies can thrive, lead and succeed, but need to acquire a few skills to help them navigate in this new global economy.  The main message is to focus on opportunities, not obstacles and learning how to play in the global sandbox, i.e. identify the new and emerging players, understand the dynamics and how other cultures conduct business, and adapt to the new rules of the game.

 

growglobalbook.jpg

 

Ultimately, a successful global expansion is dependent on a company’s ability to view the world in a new way. In this increasingly complex and competitive global environment exceptional skill is then needed to evaluate the options, manage the risks and execute a winning expansion strategy.  Winners will reap the benefits, while expanding and executing growth strategies more quickly and more effectively than their competitors. What was won’t return, and there are new players, new rules and it is a global economy.

 

Be fast, flexible, innovative, motivated and enjoy the adventure!  It’s a big world out there with lots of potential for businesses with a keen entrepreneurial spirit.

 

The decision to expand globally can be exciting and difficult all at the same time.  Doing business across cultures starts with thorough preparation and an understanding that because of our traditions and cultural differences, individuals do not think, judge, behave, perceive, and reason alike.  To successfully do business across borders it requires us to be more flexible, to better manage the unexpected, negotiate and work together with our counterparts in other countries, presenting an additional set of factors, opportunities and challenges to master.

 

Penetrating and developing an international market requires an entrepreneurial philosophy and drive—the same kind of philosophy and drive behind every successful startup business.  Following that logic, America—the birthplace of the modern entrepreneurial spirit—should perform well in the global business.  Also, with its multi-cultural diversity, theoretically it should improve its chances for global success.  Plan, commit and act.  Know to ask the right questions, do the due-diligence and get the right data, and understand that there are many ways of doing business and corporate America needs to learn and adapt.

 

The new frontier is that there is no frontier – how small to middle-market businesses respond to this reality may have a significant impact on the economy as a whole.  Savvy entrepreneurs will likely see opportunity where others see impasse.

 

Where to Start?


Be prepared isn’t just a boy scout’s mantra.  It is essential in every business and even more so when going global.

 

It all starts with making a commitment to stop peeking through the keyhole, open the door and get in the global game.  Entering the global marketplace requires a tremendous dedication of resources, capital, time, and leadership.  It has to become a priority.

 

Perform a thorough market readiness assessment.  Ask the right questions, and perform due diligence in context to identify your potential customers and learn to think locally.  Where in the world should you go?  How are you going to go about it?  What information do you need to have to make the right decision?  A detailed scan will get your expansion right the first time around and avoid costly financial and opportunity losses. There is too much data out there, therefore, the real skill is to know who to strategically interpret it in a global context and relations to your company, and then integrate it into the overall vision.

 

Plan and define the right opportunity for your company and establish realistic goals; everything takes longer than expected: Do not underestimate the time and expense of launching products/services into the global marketplace.

 

Action:  There is always a learning curve that can be optimized and shortened with getting expert advice to help you accomplish your goals across borders.  Make sure you deploy the right team;  a successful vice president of sales in the United States may not employ the skills necessary to navigate the global market.  Adopt appropriate polices and strategies to cope with different cultures:  These are the sensitivities that can make or break a deal. Consider language, negotiation styles, gender issues and local business practices. Remember, there is no one way to do business, and in order to be successful, mastering cross border negotiations skills, a wide array of corporate growth models and knowing how to develop traction.

 

Implementation:  Strategies fail in the execution phase, so being in-tune with the changing reality, charting actionable steps and having the best talent that understands and can deliver global growth.

 

Keep your eye on the ball.  Maintain success, build on it and leverage growth.

 

3. What global supply chain issues are important to consider?

 

To compete amid an environment of constant and rapid change, successful organizations are improving the alignment between business strategy and supply chain strategy and enabling their people, processes and technologies to support this alignment.

 

It’s critical to look across all aspects of the supply chain to identify the social, environmental, operational, financial, strategic and reputational business risks. Most of these risks are not new and supply chains have adapted and developed to take many of the challenges and trade-offs into account. However, one major change is the pace of change itself. Recent examples include; the impact on parts supply caused by the Japanese Tsunami, and the fluctuation of oil price and supply resulting from the Arab Spring.

 

Organizations and their Supply Chain’s face increasing risks from threats including surging prices, natural disasters, changing legal regulations and globalization while still under pressure to respond and find growth and progression in new markets.

 

In a rapidly changing world, on many levels, supply chain becomes riskier and needs to be more flexible due to growth markets (used to be the BRICS, now looking at the CIVETS, and others), innovation (new ways and more than one way of doing product in a variety of markets), the need to compete in addition to price (involving currently fluctuation, lean, efficient), on other features such as time to market, a shorter lifecycle, political as well as mother nature disasters that require to put in place back-up vendors and other resources, and changing demands, technology and CPFR (Collaborative Planning, Forecasting & Replenishment).

 

Managing competitive pressures on a global scale requires a change in business models and supply chain planning and rationale.  Collaboration and other strategic models serve local customers with complex supply lines, and tend to be flexible with changing market boundaries and new channels.

 

Supply chains in a global environment must be able to react to sudden changes in parts availability, distribution, or shipping channels, import duties, and currency rates. 
Other issues may include the scarcity of local specialists who handle duties, freight, customs and political issues.

 

As countries around the world differ in their degree of preparedness and sophistication, inefficient transportation and distribution systems can hold a company back, not to mention market instability, language barriers, customs, political turmoil, trade imbalance, export surges and recessions.

 

Collaborate, be innovative, flexible, do your homework – due diligence, (models for global competitiveness and growth are in my book, chapters 6 and 7.

 

4. Where do you see the future for American small to mid-sized businesses?

 

The new reality is more change than continuity, so US businesses must adapt to the new reality, observe and learn how to join the global game.  How will new global players, the new playing field, and the new rule book impact small and middle-market business?  Globalization has created a sense of volatility and unpredictability that requires reasoning and collaboration across borders. How will transnational issues such as diminishing natural resources, cyber security, widening inequality, and the increased proportion of women in the work forces impact your global plans? Planning for the future requires increased awareness of global trends and the ability to turn these into opportunities.  Globally.

 

Obviously, no one can predict what the future holds. Nothing is certain. But as business leaders today we must start asking the tough questions. For example: What kind of future do we want? What kind of company do we want to build? What can we contribute to creating the reality we desire? Equally important, recognize that, long term, it’s in the US best interest to collaborate with countries like China, India, Brazil, Russia, as well as those emerging markets, to make sure they grow in stature and become constructive international players.

 

When you look at the 21st century, it’s not about who will replace the United States in terms of economic power and value leadership. No country can or will in the foreseeable future. The real danger is that no one will. Without world growth, the U.S. economy will stagnate because American businesses will lack new markets and the necessary global partners for international growth. Therefore, it’s important for businesses of all sizes to explore innovative ways to enter global markets on the right path that minimizes risk, generates the highest rewards, and builds a stronger world.

 

With this in mind, here is a list of key points to keep in mind:


Political and economic power is shifting from the West to the East.


Transnational issues such as potential energy, water, and food shortages will fundamentally change the way business is conducted.


Make sure your long- term planning takes into consideration global trends.  This is where the opportunities for growth are.

 

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Includes excerpts from Grow Globally: Opportunities for Your  Middle-Market Company Around the World.  Copyright (c) 2011 by Mona  Pearl.  Reprinted with permission of John Wiley & Sons, Inc.

 


The Middle Market Advantage:  The Right Mix


Middle Market companies are the most neglected and underserved and with  the highest growth potential.  While larger, and multi-national  corporations have more resources to invest in exploiting these new  opportunities, smaller companies, up to $1B are more agile and can more readily adapt to change.  And the proof is in reality:  middle market companies have been relatively stable in their performance during the last few years:  they are the ones driving sustainable growth, create  jobs and innovate.  However, when it comes to expanding globally and  looking for opportunities across borders, only about 30% of them even try, not to mention the ones that try and fail.

 

How can corporate leadership take one large step back and look  into the global marketplace to discover and assess new opportunities and  new avenues to generate future growth?

 

The Opportunity


Instead of gazing with fear at the global expansion process, focus with excitement and starry eyes at the opportunities and, most importantly,  plan for success. Middle market companies are greatly positioned for  global growth, and here are the three top reasons why:

 

In a global context, this size companies usually are considered large, and can compete globally on a scale that provides them with a competitive edge. A $500 million company in the US may be considered middle market, but in most regions of the world, this is considered quite a large organization. It offers credibility and demands attention  in cross-border markets.

 

Middle market companies are more flexible, innovative and able to change and adapt much faster than the large multinationals.  That is a combination of size, layers of management as well as corporate culture  that are more entrepreneurial and forward thinking.  Penetrating and developing an international market requires an entrepreneurial  philosophy and drive—the same kind of philosophy and drive behind every  successful startup business.  Following that logic middle market companies should be the champions and enjoy exponential global growth.

 

The leadership in middle market companies is more  entrepreneurial, intimately involved and in-tune with the daily  operations and by having fewer layers to go through, can adapt, move and  act much faster.  In many cases, the core team that started this venture is still around, and there is more of a tight and personal corporate culture.

 

The risk may lie in NOT expanding into global markets


Current and projected market growth is outside the US. The search is ongoing for markets that promise growth and new opportunities for  businesses around the globe.  Activity spans the globe:


The G-7  (Canada, France, Germany, Italy, Japan, the UK and the United States)
The BRIC (Brazil, Russia, India and China)
The  N-11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey  and Vietnam)
The CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa)
The MIST (Mexico, Indonesia, South Korea and Turkey) 
And the 3G (Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam)

 

If your product is seasonal, your options may be limited in the US.  Why not choose markets that offer year round sales potential?


Your product/service shelf/life cycle may have timed out.  Why not look for markets where there is a need for your type of product and you can extend its shelf life?  Not every market is appropriate for the latest and greatest!


How about collaborating with other brains from around the world and thriving by innovation?  You have a closer relationship with the target markets and will get ideas for products you could never generate in-house.

 

 

About Mona Pearl

 

monapearl.jpg

 

Hands-On, Real World Strategies for Global Growth

Adjunct Professor at DePaul University                                                                
Founder & COO at BeyondAStrategy, Inc.
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Phone: +1.312.642.4647

I interviewed Daron Whisman who discussed his views on the SAP aquisition of Ariba. Daron works at for-profit and non-profit companies, mainly within healthcare in the finance area with the last few years focused more on financial operations where he bridges the technology chasm along with the supply chain chasm. Within healthcare there are a lot of bifurcated systems and a lot of independent systems. He tries to harness the people, process and technology. Along with that you end up doing a lot more process changes along the way that need to done. For the last four years Daron and his team implemented a program within healthcare. This is where he ran into the president Tim Cummins of IACCM (International Association for Contract & Commercial Management)

 

 

SAP acquisition of Ariba and what it means

 

Through the whole P2P process Daron and his team had evaluated invoicing components and looked at the different software packages out there. At the time as far as the big software packages out there they quite frequently ran into OB10 and Ariba. They did a lot of the evaluation, looking at a lot of the large software ERP packages, as well as 'Best of Breed' which are the smaller niche providers. There are two philosophies out there:

 

  1. Providers charge suppliers to be on their robust network

  2. Network is made of free users where efficiencies gained through the process will self fund the internal package.

 

Ariba and OB10 didn't think it was a good strategy to charge the suppliers for an invoice. Ariba has a huge network and they are into cloud computing which allows them to make changes quicker and also charge software as a service (SaaS). Then SAP came along. SAP is not as entrenched in healthcare as Lawson (who was acquired by Infor) or Peoplesoft. SAP is mainly with a lot of the manufacturers Daron does business with in Healthcare.

 

The acquisition of Ariba gives them a well-rounded solution where they can bridge that P2P gap from start to finish and be the expert system in place. Daron can see SAP trying to venture into healthcare with this Ariba acquisition also.

 

There has been a lot of talk about whether this was a good acquisition for SAP. Daron believes it was because you get the process flow from a supplier network which was already on board. You also have the procurement side of Ariba. SAP is the ERP package within the four walls. Some electronic payment providers on the commercial cart side like SAP because SAP has done a merger with American Express whereby if they accept American Express they can automate that platform and reduce the AR retentions within that platform.

 

Implications for supply chain professionals

 

If you look along the evolutionary cycle of supply chains earlier on you had people collaborating internally within their 4 walls of their ERP systems. There is a lot of work in contracting, price validation, receipt verification and the 4-way match. Then they also realized that they had to collaborate with their strategic partners. You can use EDI or a front end interface. With that acquisition of Ariba it is like SAP is in the box and Ariba is everything outside of that box. Those manufacturers can have better connectivity with each other. You go from collaboration to 'orchestration' where everyone is in sync with one another and the processing platform. You create a synchronized hand-off not only of delivery of goods but the invoicing of procurement and the payment.

 

Downsides

 

The downside is that with any ERP acquisition is that generally ERP systems are very rigid. How much of Ariba's flexibility will be affected by SAP's acquisition? You see that when Chase acquired a company which was fine by itself but after the acquisition it became a banking rigid structure and it didn't create a lot of flexibility. It is really interesting to see if the flexibility will be there and the adoption rate. What are people going to do who have SAP but that don't have Ariba, or have Ariba in house on the first 2 sides but don't have an invoicing platform and they have to make a lot of these decisions?

 

Do we add on these complementary packages with this merger? How do we synchronize that with the timing of the merger? SAP has a very well rounded network and so does Ariba. There are some complimentary but also chances to grow their networks through the acquisition.

 

Conclusion

 

It is interesting to see how ERPs are evolving. ERP started out to be an internal solution for companies. They were an enterprise system for reporting on the operational and the financial side. It was a rough go in the mid 1990s when they were sold, or people bought them.

 

Now that they have gotten better at the internal within the four walls, they realize they have to be more adaptable quicker. The processes are aligned a little bit better. Companies can't do this through hardware, they have to do it through software or through cloud computing.

 

The Ariba will help because everyone can't be on a hardware platform but a software as service (SaaS) where everyone has more accessibility and real time updates creates a hyper transition period.

 

Daron Whisman

Supply Chain Executive

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